Exclusive Insight: CCP’s 2nd Plenary Session approved a plan to completely transform many Party and government departments
Today's issue of The China Brief covers a range of topics, from China's economy potentially emerging from the zero-Covid shadow to the country's increased ties with Belarus amid concerns over its support for Russia in the conflict with Ukraine. The issue includes news of China's government "reform" plan, the US congressional select committee on the competition with China's first hearing on human rights, and a cyber attack on a Belgian MP linked to Chinese state-sponsored hackers. Additionally, the issue covers the surge in seasonal influenza cases in China and China's grant of a $700m loan to Pakistan. Lastly, an article in Foreign Affairs discusses how China's success as a global tech superpower challenges the United States' focus on scientific research and development and highlights the importance of prioritizing advanced manufacturing and centering on workers and their process knowledge to compete with China.
And here’s today’s exclusive insight:
Exclusive Insight: CCP’s 2nd Plenary Session approved a plan to completely transform many Party and government departments
On the final day of February 2023, Chinese media released two news items that shed light on the eagerly anticipated Party and government institutional reform plan that will be "deliberated and approved" at the National People's Congress in March. The first report was the press release of the 20th Central Committee of the Communist Party of China's Second Plenary Session, which established the fundamental principles of the institutional reform to "strengthen the centralized and unified leadership of the Party Central Committee, modernize the national governance system, and enhance governance capacity."
At least in "key areas," a Party Central Committee department, like the United Front Work Department, will be established to cover related State Council departments, ensuring that the functions of the State Council solely serve the Party and implement its policies. The second news item, Xi Jinping's speech on February 28, indicated that these "key areas" might include "deepening financial system reform" and "improving the Party's unified leadership of science and technology work." Existing State Council-related departments will also undergo significant changes.
Xi Jinping called for the "optimization of the government's responsibility system and organizational structure," with State Council departments, offices, and bureaus being closed, merged, or reorganized. The various "leadership groups" and committees set up within the Party over the past decade will become permanent concrete Party Central Committee departments, providing actual coverage in terms of organization to the State Council departments they had previously managed.
Additionally, Xi Jinping highlighted the need to "promote grassroots governance led by Party building, strengthen the Party building work of mixed-ownership enterprises and non-public enterprises," and "clarify requirements for the management system of Party building work in industry associations, academic societies, and chambers of commerce." Relevant grassroots enterprises must establish Party committees, as Shaanxi Province did some time ago by dispatching first secretaries to key non-public enterprises, and the Party's leadership over mass organizations such as associations, academic societies, and chambers of commerce must also be strengthened.
Xi Jinping suggested that the institutional reform would be "more targeted, forceful, wide-ranging, and touch on deeper interests," indicating that many departments would undergo a complete transformation, perhaps similar to the military system reform he carried out years ago, which changed the numbering, structure, military regions, and even the headquarters of the People's Liberation Army.
NYT: China Welcomes Belarusian Leader Amid Concerns About Ukraine
Belarusian President Alexander Lukashenko has arrived in Beijing for a three-day visit, during which he is expected to meet with Chinese leader Xi Jinping. The visit comes as the US and Europe grow increasingly concerned about China's position on the war in Ukraine and accusations that China plans to give arms and ammunition to Russia to support its war on Ukraine. The US State Department has described the visit as another sign of China's growing ties with Russia and its support for Russia's side in the conflict. Mr. Lukashenko's visit will focus on economic support for Belarus, which is increasingly isolated by sanctions, and on closer ties with China as a counterweight to Russia.
WSJ: China’s Economy Seen Emerging From Zero-Covid Shadow
According to data from the National Bureau of Statistics, China's economic activity expanded for the second consecutive month in February, indicating the country may be shaking off the impact of pandemic curbs. The data is expected to strengthen the case for policymakers to raise their forecast for annual growth for this year, seen as a key step to restoring confidence in both the economy and the country's leadership. However, economists warn that the data reflects pent-up demand released by the exit from zero-Covid controls in December and January. The scars of the pandemic may run deep.
WSJ: FBI Director Says Covid Pandemic Likely Caused by Chinese Lab Leak
FBI Director Christopher Wray has said that the Covid-19 pandemic was likely caused by a lab leak in China, providing the first public confirmation of the FBI’s classified judgment on the virus's origin. Wray also said that the Chinese government has been trying to “thwart and obfuscate” the investigation into the pandemic’s origins. The Wall Street Journal reported earlier this week that the FBI had reached the same conclusion in 2021. However, four other intelligence agencies, including the National Intelligence Council, still believe the virus originated from an animal source.
Nikkei: China's Xi lays out government 'reform' plan at party plenum
The Central Committee of China's Communist Party concluded a three-day plenary session, during which President Xi Jinping explained a draft plan for "reform" of the party and government institutions. The plan involves moving policing and security functions from the State Council to a new internal affairs commission directly controlled by the Communist Party, expanding the party's powers. The Central Committee also solidified nominations to the State Council. Li Qiang was believed to have been unofficially tapped as premier and He Lifeng set to become vice premier responsible for steering macroeconomic policy.
Nikkei: China's Xi lays out government 'reform' plan at party plenum
The U.S. congressional select committee on competition with China held its first hearing on Tuesday, focusing on human rights. The Republican chairman of the House of Representatives Select Committee on the Chinese Communist Party (CCP) warned that the situation is an "existential struggle" and that the most fundamental freedoms are at stake. The committee aims to convince Americans why they should care about competing with China and to "selectively decouple" the U.S. and Chinese economies. The hearing had four witnesses: H.R. McMaster, former Republican President Donald Trump's national security adviser, and Matt Pottinger, a longtime China hawk. The committee will not write legislation but draw attention to competition between the United States and China on various fronts and make policy recommendations.
FT: U.S. CHIPS Act fund bars chipmakers from China expansion for 10 years
The US Commerce Department has announced that chipmakers must agree not to expand capacity in China for a decade if they are to receive funding from a $39bn federal fund designed to build a leading-edge US semiconductor industry. The CHIPS and Science Act passed by Congress last year was aimed at creating an industry capable of mass-producing leading-edge semiconductors, with the Department announcing that companies receiving funding must also not "knowingly engage in any joint research or technology licensing effort with a foreign entity of concern that involves sensitive technologies or products." Companies must also agree to other restrictions, including prohibiting using the money for share buybacks or dividend payments.
FT: Belgium’s cyber security agency links China to spear phishing attack on MP
Belgium’s cyber security agency, the Centre for Cyber Security Belgium (CCB), has linked Chinese state-sponsored hackers to a spear-phishing attack on Belgian MP Samuel Cogolati. The MP was targeted in January 2021 after writing a resolution regarding human rights abuses against Uyghur Muslims in China. The CCB linked the attack to APT31, adding that the group “has shown interest in people who have criticized the actions of the Chinese Communist Party.” The CCB’s willingness to attribute the attack to China comes as European cyber agencies become more open about calling out the country over suspected incidents.
SCMP: As Covid-19 wanes, seasonal influenza cases are surging in China
China is seeing a surge in seasonal influenza cases just as its latest Covid-19 outbreak wanes, with outbreaks almost tripling in the last two weeks of February. Authorities have issued health alerts and some schools have suspended classes, while supplies of Tamiflu, an antiviral used to treat seasonal flu, are reportedly running low at pharmacies. Health authorities attributed the rise in influenza A cases to factors including low immunity and more movement of people after Covid-19 restrictions were scrapped in December.
SCMP: Embattled Pakistan gets US$700 million China surprise, but the threat of ‘lost decade’ remains
China has granted a $700m loan to Pakistan, which will boost the forex reserves of the nation’s central bank to nearly $4bn. Despite the new funding, concerns about Pakistan’s economy remain, with observers suggesting that the nation is unlikely to undertake the structural reforms necessary to avoid a possible default. The country is in critical negotiations with the International Monetary Fund (IMF), with further loans potentially on the horizon. However, delays in an agreement with the IMF led Moody’s rating agency to downgrade Pakistan’s long-term foreign debt rating. The hoped-for resumption of IMF funding in March is expected to trigger financial help from allies Saudi Arabia and the United Arab Emirates, as well as multilateral lenders such as the World Bank and Asian Development Bank.
Foreign Affairs: China’s Hidden Tech Revolution: How Beijing Threatens U.S. Dominance
China's rise as a global tech superpower challenges the notion that scientific leadership automatically translates into industrial leadership. Its success is attributed to its vast and sophisticated manufacturing workforce and government support, which has enabled it to leverage its process knowledge to outcompete the United States in various strategic technologies. The United States’s focus on scientific research and development has left manufacturing capabilities to wither, resulting in a decline in process knowledge and leaving it in a poor position to dominate emerging technologies. To compete with China, the United States must prioritize advanced manufacturing, build industrial ecosystems, and focus on workers and their knowledge of processes.
That concludes today's issue of The China Brief. From China's economy emerging from the shadow of zero-Covid to the country's hidden tech revolution and its implications for the United States, we hope that today's edition has provided you with valuable insights into the latest developments in China.
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